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The fire and rehire strategy

A long-established but, up until a couple of years ago, relatively rarely used tactic for achieving variations to employee terms and conditions is that of ‘fire and rehire’. This is where an employer will dismiss an employee and then offer to rehire them on new, usually less favourable, terms. Alternatively, an employer may threaten to dismiss an employee unless they agree to sign a new contract.

There are a variety of reasons why an employer might adopt a fire and rehire strategy. Often it is used as a means of ensuring that there is no room for argument that the terms have been varied in advance of employees acquiring those precious two years of continuous service (that entitle them to bring a claim of unfair dismissal and, more to the point, constructive unfair dismissal). However, more employers are now using it with their workforce generally (irrespective of length of service) to force through changes in contractual terms with employees after or, in some cases, instead of consulting with the staff about the proposals. Employees are sometimes given very little time to consider the new proposed contractual arrangements.

Whilst this tactic may seem quite brutal or callous, in the eyes of the law, so long as the employer has a fair reason for dismissal and has adopted a fair process in advance of such dismissal, it is completely lawful. As a result, in the wake of employers as varied as British Airways, British Gas, Jacobs Douwe Egberts and Tesco adopting this approach, public pressure was applied to the Government pressing for reform and, in response, the Government commissioned ACAS to conduct a fact-finding exercise.

ACAS took representations from a number of stakeholders such as employers, trade unions and HR professionals. Most participants criticised the practice of fire and rehire, describing it as ‘a “smokescreen” to diminish workers terms and conditions’ and contending that it serves to ‘undermine or bypass genuine workplace dialogue on change’. Others were more positive about the practice, arguing that it can be a useful tool when used ‘as a last resort’ and ‘driven by genuine business needs’.

ACAS found that the prevailing view was that employees do not have a sufficient level of protection against unscrupulous employers and that legislation should be introduced to restrict the practice of fire and rehire. However, there was an acknowledgment that it should be permitted in circumstances whereby it is a ‘genuine and unavoidable option of last resort’.

So, what steps have been recommended to the Government? Suggestions so far include making fire and hire dismissals automatically unfair, requiring employment tribunal to scrutinise cases to identify employers using fire and rehire, and ‘naming and shaming’ those employers who dismiss and re-engage employees on a Government website. Thus far, the Government has not put into effect any of these recommendations.

In the meantime, in June 2021, Labour MP Barry Gardiner introduced the Employment and Trade Union Rights (Dismissal and Re-engagement) Bill to parliament. This proposed legislation aimed to provide greater protections for employees against the use of fire and rehire practices. However, as this was only a Private Members Bill which lacked Government support and, in October, it was blocked from progressing further. The Government claimed that there was ‘insufficient evidence to show legislation will stop the practice or will be effective’, preferring instead to ask ACAS to produce comprehensive guidance.

If you have any questions about the practice of fire and rehire, please email or call our Employment Law team today on 0113 207 0000.

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Paul Kelly

Partner and Head of Employment
Employment Law
0113 227 9249
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Paul Kelly Blacks Solicitors LLP